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August 25, 2009

Behind the BlackBerry Boss's Hockey Brawl

Like many Canadians, Research In Motion (RIMM) co-CEO Jim Balsillie is a tad obsessed with hockey. He plays right wing in a pickup league and named all the conference rooms in his office building at RIM's Waterloo (Ont.) headquarters after the game's greats.

Now, Balsillie is brawling with the National Hockey League over whether he can acquire an NHL team. Worth about $2.5 billion from his stock in RIM, he's offered $213 million to buy the Phoenix Coyotes out of bankruptcy and move the team to Hamilton, Ont., a city of 500,000 about an hour from the BlackBerry maker's offices. But the NHL doesn't want another team squeezed between those in Toronto, Buffalo, and Detroit, and it says Balsillie lacks the "good character and integrity" to be an NHL owner.

Them's fighting words for Balsillie. In a bankruptcy court filing, he says any character flaws he has pale in comparison with those of others in a league that "has long tolerated indicted and even convicted criminals among its ranks." He also thinks Hamilton is the ideal market for a hockey franchise, given the region's enthusiastic fans. "It's the largest unserved hockey market in North America," he says in a phone interview.

The NHL in Phoenix: $300 Million Lost

The franchise's move to Arizona certainly hasn't worked out financially. Once the Winnipeg Jets, the team left for Phoenix in 1996 as part of NHL Commissioner Gary Bettman's strategy to broaden hockey's appeal. But the team has lost $300 million since the move, in the face of tepid fan support. The Coyotes' attendance averages 76% of capacity, well below the league's average.

Although Hamilton is only an hour south of Toronto, Balsillie says there are plenty of fans for two teams. He points out the wait for the Toronto Maple Leafs' season tickets can stretch more than a decade, and they go for tens of thousands of dollars. He also argues that if the New York metropolitan area can support three teams—the Islanders, the Rangers, and the New Jersey Devils—then southern Ontario should be able to support two. "I think I have an approach here that will create a lot of value for the franchise, the league, and for the fans," he says.

The Coyotes' owner, trucking magnate Jerry Moyes, favors selling to Balsillie. But the NHL is taking the unusual step of offering to buy the team itself for $140 million, with plans to resell it to another owner in the future. (The league had originally backed a $148 million offer from a group led by Chicago Bulls owner Jerry Reinsdorf, but that bid was pulled on Aug. 25.)

Balsillie Bid for a Team Twice Before

The NHL's board of governors, which has the final say over who can become a team owner, has several reasons for opposing Balsillie. The league is wary because he came close to acquiring the Pittsburgh Penguins in 2006 and the Nashville Predators in 2007 but backed out late in the process both times. League governors also don't like that Moyes and Balsillie negotiated a deal under the cover of a bankruptcy proceeding without consulting them. The NHL not only is supposed to have authority over such transactions but also gave Moyes cash advances and loans to get him through last season.

The biggest dispute is over the franchise's location. The league may be reluctant to undermine the health of the existing franchises around Hamilton to accommodate a newcomer. The NHL also says Phoenix has the potential to evolve into a viable market with new management and more success on the ice.

The next step in the process will be a hearing in bankruptcy court on Sept. 2 over whether Balsillie's bid can proceed. After that, the team is expected to be auctioned on Sept. 10. Even if Balsillie comes up short this time, the league is likely to hear from him again soon. "It's no secret that there are other financially troubled teams out there," he says. "And I've certainly been approached by other owners."

Facebook Fogies

Facebook started out in 2004 as an online hangout for college students. Now it looks like the baby boomers are crashing the party. Membership on the social-network site of U.S. users age 55-plus shot up 25%, to 7.3 million, in the one-month period ending Aug. 4, according to Washington researcher iStrategyLabs, which collects data Facebook gives to advertisers. That's more than triple the rate of growth for all U.S. users on the site in the same period. Older Facebook users now represent about 10% of the total 77.7 million registered with the site in the U.S., according to iStrategyLabs data.

The graying of Facebook has been under way for some time, but it really accelerated this year. During the first half of 2009, the number of people in their 50s on the site "more than doubled," notes Facebook spokeswoman Brandee Barker. "Most likely the trend started with younger people convincing their parents and grandparents to engage," says Danah Boyd, who tracks social media for Microsoft Research (MSFT). And the dramatic increase in this demographic group may be the result of these early converts spreading the social-networking religion among their peers.

Older members find the site a convenient way to rekindle bygone friendships. Christine Drost, a 55-year-old nurse who lives in Randolph, N.J., decided to join in early August after finding out her old friends from a drum corps she played with more than 30 years ago had started a group on the site. "That was the final push I needed," says Drost, who now uses the site to share pictures and update friends and family on her whereabouts.

Boomers are also attracting new advertisers, such as Dove and 1-800-FLOWERS.com, to Facebook, which relies on ads for the bulk of its estimated $500 million in revenue.

Will younger users flee Facebook when they realize mom and dad might be peering over their shoulders? In an effort to help the generations coexist on the site, Facebook announced in July it's testing new privacy controls that will permit members to choose exactly who's allowed to see each message they post.

Will China Pick Up the OPhone?

Pity the gadget-hungry consumer in China. If you want an iPhone, you have to go to the black market, since Apple (AAPL) hasn't been able to negotiate a deal with a Chinese carrier to sell legitimate versions of the handset. Now, China Mobile—which tried but failed to reach a deal with Apple—has an alternative pitch for customers seeking cachet: Try an OPhone.

The mainland's top operator hopes consumers won't care about the one-vowel difference. By yearend, China Mobile plans to roll out several different OPhones, 3G handsets based on Google (GOOG)'s Android software. Among the players working with China Mobile are Dell (DELL), Philips (PHG), LG, Samsung, and Taiwan's HTC. "The problem we have is not the 3G network, but rather a lack of cell phones that can support it," China Mobile Chairman Wang Jianzhou said on a visit to Taiwan to announce a partnership with HTC.

China Mobile could use a boost. With 493 million subscribers, it has more than 70% of the local cellular market, ahead of China Unicom (CHU) and China Telecom (CHA). But it's facing more heat since Beijing let 3G networks into China early this year. Apple had no comment.